Managing growth & inflation has become challenging for policy makers:

India has sustained GDP growth of 8.9% in first two quarters of the year,

On commenting RBI Credit Policy Aneesh Srivastava, Chief Investment Officer, IDBI Federal Life Insurance Co Ltd said "Indian economy is facing severe headwinds of high Inflation, retarding Growth & ballooning Current Account deficit. Managing growth & inflation simultaneously has become very challenging for policy makers. India has sustained GDP growth of 8.9% in first two quarters of the year, however its Industrial Production growth has come down substantially from double digit growth in first half of the year to 2.7% in November ’10 and it is expected to be bad for month of December ’10 as well. Larger part of this retardation in due to slowdown in manufacturing sector, which may get reflected in retardation of GDP growth for next two quarters. At the same time, inflation has remained much high. WPI at 8.43% and CPI- Industrial Workers at 8.33% are high and leading to higher inflationary expectations. Although large part of inflation is due to supply driven constraints, inflation has also remained high due to rising crude & commodity prices. Most of the emerging markets including China are making efforts to fight inflation. Some tightening can help control demand when supply bottlenecks are leading to price rise. However, simultaneous efforts to fight inflation by emerging economies would help bring down commodity price driven inflation. Although credit growth has picked up to approx 25% as on 31st Dec ’10, Liquidity in system is tight (Rs.72,000 crore Repo) which is tighter than RBI’s indicated level of Rs. 50,000 crores. In light of falling manufacturing growth and rising inflation & tight liquidity conditions, policy decision has opted for – Increasing Repo & Reverse Repo rate by 25 bps so as to control inflation. Provided incremental liquidity in system to support growth".

Bajaj Allianz launches new products

Bajaj Allianz launches new प्रोदुक्ट्स These products are Bajaj Allianz Super Cash Gain and Bajaj Allianz Money Secure. Bajaj Allianz Life Insurance has launched two new products catering to the financial needs of various stages of life. These products are Bajaj Allianz Super Cash Gain and Bajaj Allianz Money Secure. Super Cash Gain is a traditional money back plan that gives cash back at regular intervals in the form of a periodic income, helping you to enjoy the small pleasures of life. Starting at a monthly premium of Rs. 600, this plan comes with the option to select up to four-times of base sum assured as life cover. Besides this, Bajaj Allianz Super Cash Gain offers the following features – Option to convert into a single premium term cover with return of premium provided you have paid at least 5 years premium in full. Get 20% of the base sum assured as cash-back at regular intervals, which can be taken as cash or adjusted against your due or future premium. Flexibility to pay future premiums in advance and avail discounts. Option to keep your policy in-force for full sum assured in case you miss to pay your premiums on due dates, provided you have paid at least 3 year’s premiums in full. High sum assured rebate on premium Optional riders to enhance your protection. Money Secure is a regular premium ULIP that provides security to your investment with guaranteed maturity benefits. Starting at an annual premium of Rs. 7,000, Money Secure is the smallest ticket-size ULIP from the stable of Bajaj Allianz. The unique features of this product are: Option to select policy term and premium paying term Automatic increase in sum assured from 6th policy year Maximum Flexibility with: Partial withdrawals anytime after five years from the commencement of the policy Top-up premium payment over and above regular premiums Option to decrease sum assured Option to change premium payment term and alter premium payment frequency Optional riders to enhance protection Akshay Mehrotra, Head – Marketing, Bajaj Allianz, said, “Both these insurance plans offer an opportunity for securing a better financial future. Designed to take care of financial needs in various life stages, these two insurance plans offer one of the lowest premiums in the market.” Also speaking at this occasion, A S Narayanan, Chief Distribution Officer, Bajaj Allianz Life Insurance said “Financial planning is essential for every individual. Both these plans offer masses the capability to save regularly and maximize returns. We believe our strong distribution network will make such products available across the country.” Both these pans can be bought from any of Bajaj Allianz office, Super agents and distributors spread across the length and breadth of the country across 1000+ towns.

RBI policy in line with expectation:

The central bank also extended the 1% leeway in the SLR up to April 8. CRR has been left unchanged at 6%.

The Reserve Bank of India (RBI) on Tuesday increased the key policy rates by 25 basis points (bps) each, as the central bank steps up its efforts to tackle a stubbornly high inflation at the cost of some moderation in economic growth. The repurchase rate (repo rate) has been hiked by 25 bps to 6.50%, while the reverse repo rate has also been increased by 25 bps to 5.50%. The central bank also extended the 1% leeway in the SLR up to April 8. CRR has been left unchanged at 6%. The inflation target for FY11 has been increased to 7% from 5.5% earlier while the GDP forecast for the current fiscal year has been kept steady at 8.5% with an upward bias. The RBI had raised key policy rates six times last year as the Indian economy accelerated, sending inflation sharply higher. But several factors, including unseasonal rains and spike in global commodity prices has kept inflation elevated. Dr. D. Subbarao, Governor of the RBI had decided to take a pause in its last meeting on December 16 amid a severe shortage of cash in the banking system and some softening in food inflation. Inflation shot up to 8.43% in December, from 7.48% in the previous month, the Government said on January 14. October's inflation rate was revised to 9.12% as against the provisional estimate of 8.58%. Inflation in the Food Articles group fell to 15.52% in the week ended January 8 from 16.91% in the week ended January 1, the Commerce & Industry said on January 20. The RBI said today that the new actions are expected to: Contain the spill-over from rise in food and fuel prices to generalised inflation. Rein in rising inflationary expectations, which may be aggravated by the structural and transitory nature of food price increases. Be moderate enough not to disrupt growth. Continue to provide comfort to banks in their liquidity management operations. The next mid-quarter review of the Monetary Policy for FY 2010-11 will be announced through a press release on March 17, the RBI said today. The Monetary Policy for FY 2011-12 will be announced on Tuesday, May 3. S P Prabhu, Vice President- Fixed IncomeFund Management - IDBI Federal life Insurance Co ltd says “The debt market was expecting a 25bps hike in the Repo Rate and the policy announcements has been in line with market expectations. However, concerns over inflation remain, particularly on the food price front. Given the limited amount of Government Borrowing Program ahead in the current financial year, the market is expected to consolidate around the current levels. We expect the 10 year yield to be in the range of 8.00% - 8.50% over the next few months. The tight liquidity situation is a combination of large Government balances and robust credit off-take. The abnormally large Government balances problem is due to time mismatch in Government ‘s revenue and expenditure cycle and will self correct over the next couple of months. The structural problem on the liquidity front is that the growth in credit is 24% while deposit growth is slower at 16%. Banks will have to address the issue with a combination of aggressive deposit mobilization and higher deposit rates. The RBI decision to extend the 100bps regulatory forbearance on SLR till April will provide the much needed liquidity support to the market.”